You have just been hired as a financial analyst for Lydex Company, a manufacturer of safety helmets. Your boss has asked you to perform a comprehensive analysis of the company's financial statements, including comparing Lydex's performance to its major competitors. The company's financial statements for the last two years are as follows: Assets Current assets: Lydex Company Comparative Balance Sheet This Year Last Year Cash Marketable securities Accounts receivable, net Inventory Prepaid expenses Total current assets Plant and equipment, net Total assets Liabilities and Stockholders' Equity Liabilities: Current liabilities Note payable, 10% Total liabilities Stockholders' equity: Common stock, $70 par value Retained earnings Total stockholders' equity Total liabilities and stockholders' equity Lydex Company $ 950,000 2,500,000 3,550,000 250,000 7,250,000 9,420,000 $ 16,670,000 $ 1,110,000 300,000 1,600,000 2,000,000 190,000 5,200,000 9,000,000 $14,200,000 $ 3,960,000 3,640,000 7,600,000 $ 2,880,000 3,040,000 5,920,000 7,000,000 7,000,000 2,070,000 1,280,000 9,070,000 8,280,000 $ 16,670,000 $14,200,000 Comparative Income Statement and Reconciliation Sales (all on account) Cost of goods sold Gross margin Selling and administrative expenses Net operating income Interest expense Net income before taxes Income taxes (308) Net income Common dividends Net income retained Beginning retained earnings Ending retained earnings This Year $ 15,810,000 12,648,000 3,162,000 Last Year $ 13,080,000 9,810,000 3,270,000 1,183,714 1,584,000 1,978,286 1,686,000 364,000 304,000 1,614,286 1,382,000 414,600 967,400 483,700 483,700 796,300 484,286 1,130,000 340,000 790,000 1,280,000 $ 2,070,000 $ 1,280,000 To begin your assignment you gather the following financial data and ratios that are typical of companies in Lydex Company's industry: Current ratio Acid-test ratio Average collection period Return on assets 2.3 1.2 40 days Average sale period 60 days 8.7% 0.66 Times interest earned ratio 5.7 Price-earnings ratio 10 Required: Debt-to-equity ratio 1. Present the balance sheet in common-size format. 2. Present the income statement in common-size format down through net income. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Present the balance sheet in common-size format. (Round your answers to 1 decimal place. Due to rounding, figures may not fully reconcile down a column.) Assets Lydex Company Common-Size Balance Sheets This Year Last Year Current assets: Cash 5.6 % 8.5 % Marketable securities Accounts receivable, net 12.1 Inventory 22.8 16.1 Prepaid expenses 1.6 1.4 Total current assets 45.8 40.1 Plant and equipment, net 55.3 61.2 Total assets 101.1 % 101.3 % Liabilities and Stockholders' Equity Liabilities: Current liabilities 23.4 % 20.7 % Note payable, 10% 21.3 20.9 Total liabilities 44.7 41.6 Stockholders' equity: Common stock, $70 par value 40.3 47.1 Retained earnings 15.0 11.3 Total stockholders' equity 55.3 58.4 Total liabilities and equity 100.0 % 100.0 % < Required 1 Required 2 >